30 Sep 2010: Analysis

A High-Risk Energy Boom Sweeps Across North America

Energy companies are rushing to develop unconventional sources of oil and gas trapped in carbon-rich shales and sands throughout the western United States and Canada. So far, government officials have shown little concern for the environmental consequences of this new fossil-fuel development boom.

by keith schneider

The most direct path to America’s newest big oil and gas fields is U.S. Highway 12, two lanes of blacktop that unfold from Grays Harbor in Washington State and head east across the top of the country to Detroit.

The 2,500-mile route has quickly become an essential supply line for the energy industry. With astonishing speed, U.S. oil companies, Canadian pipeline builders, and investors from all over the globe are spending huge sums in an economically promising and ecologically risky race to open the next era of hydrocarbon development. As domestic U.S. pools of conventional oil and gas dwindle, energy companies are increasingly turning to “unconventional” fossil fuel reserves contained in the carbon rich-sands and deep shales of Canada, the Great Plains, and the Rocky Mountain West.

Colorado, Utah, and Wyoming hold oil shale reserves estimated to contain 1.2 trillion to 1.8 trillion barrels of oil, according to the U.S. Department of Energy, half of which the department says is recoverable. Eastern Utah alone holds tar sands oil reserves estimated at 12 billion to 19 billion barrels. The tar

In North Dakota and other states, residents worry that the energy boom will deplete aquifers.

sands region of northern Alberta, Canada contains recoverable oil reserves conservatively estimated at 175 billion barrels, and with new technology could reach 400 billion barrels. Deep gas-bearing shales of the Great Plains, Rocky Mountain West, Great Lakes, Northeast, and Gulf Coast contain countless trillions of feet of natural gas. If current projections turn out to be accurate, there would be enough oil and gas to power the United States for at least another century.

But even as one of the largest energy booms in history has erupted along a great arc of the continent, the consequences are prompting civic discontent, lawsuits, and political battles in state capitals. The boom is producing fresh scars on the land and new threats to scarce water supplies. Government studies show that exploiting unconventional fossil-fuel reserves generates more C02 emissions than drilling for conventional oil and gas and uses three to five times more water. “It’s a pact with the devil,” says Randy Udall, a consulting energy analyst from Colorado. “The tar sands and shale oil and shale gas require a lot of water. It sets up a collision course for the West.”

In communities from Wyoming to Texas, thousands of trucks now rumble down rural roads, carrying the huge amounts of water — 2 million to 4 million gallons per well — needed to free oil and natural gas from shales by blasting them with high-pressure fluids. In places such as North Dakota, which receives modest amounts of rainfall, local residents and conservationists worry that the energy boom will deplete aquifers.

And the explosion in development of these unconventional fossil fuels raises a troubling question at the national level: At a time when the country should be embracing a renewable energy revolution, it is hurtling in the opposite direction, developing on a massive scale sources of energy that cause considerably more environmental harm than conventional oil and gas drilling.

Mark Ralston/AFP/Getty Images

The Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta, Canada.

Highway 12 is a crucial supply route for this burgeoning industry, with fossil fuel companies using the road to reach a good portion of the West’s new oil and gas domain that lies to the north and south of the highway. The companies transport equipment 900 miles north to Alberta, Canada, where they are spending $15 billion annually to develop the region’s tar sands, now the single largest source of oil imports to the U.S. and the fastest-growing source of CO2 emissions in Canada, according to the Pembina Institute, a Canadian environmental think tank.

In North Dakota — which has become the fourth-largest oil-producing state in the country, with an estimated 100 million barrels being pulled out of deep shales this year and where 1,000 wells will be drilled in 2010 — Highway 12 crosses the $5 billion, 2,151-mile Keystone Pipeline. It is the centerpiece of a $31 billion network of major transport lines either planned or under construction to carry oil from the middle part of the continent to refineries in Texas, Oklahoma, and Illinois that are being modernized and expanded at a cost of more than $20 billion. In all, according to company reports and state economic development offices, the oil industry is spending nearly $100 billion annually in the U.S. to perpetuate the fossil fuel era.

Oil industry executives say their investments are consistent with the national goal of producing more energy to increase security. Oil companies are also profiting handsomely from the exploitation of these unconventional sources of oil and natural gas. The stakes became clear earlier this year, when ExxonMobil paid $41 billion to buy XTO Energy, a major player in unconventional fuels production, especially natural gas.

Last year, in a much-disputed draft environmental impact statement that summarized the need for the new Keystone-XL pipeline — which will transport oil from Alberta’s tar sands to U.S. refineries — the U.S. Department of State tacitly backed the new energy boom. “The increasing demand for crude oil in the U.S. cannot be entirely met by efforts to conserve use of refined petroleum products or the increased use of renewable energy,” the department said. “As crude oil demand increases, the overall domestic supplies of crude oil are declining.” The department’s analysts added that without the pipeline and the new supplies of oil it would carry, the country “would remain dependent upon unstable foreign oil supplies from the Mideast, Africa, Mexico, and South America.”

One of the flashpoints is occurring in northern Idaho and eastern Montana, where oil companies want to use Highway 12 to dispatch the largest convoy of oversized trucks ever assembled to Alberta’s tar sands and elsewhere. The trucks, nearly as long as football fields and so wide they cover both lanes of the highway, haul refining and processing equipment that weighs hundreds of tons and is as tall as a mansion.

ConocoPhilips was granted a road permit in Idaho last month to haul four Korean-built oversized oil-processing units from Lewiston, Idaho, where

The Bakken Shale may contain 4 billion barrels of oil and trillions of cubic feet of natural gas.

they were offloaded from Columbia River barges, to the company’s expanding refinery in Billings, Montana. Earlier this month, Idaho Second District Judge John Bradbury revoked the permit, asserting that the state did not adequately assess the hazards of the shipment, particularly the consequences of an accident involving one of the immense processing units blocking the highway. Local officials in Montana are considering similar legal action.

The court judgment in Idaho, which is set for an appeal on Oct. 1, could have significant ramifications for ExxonMobil Canada, which wants to make 207 oversize hauls next year along Highway 12. Exxon’s trucks will carry even larger Korean-built units to be assembled into a new tar sands oil processing plant in Alberta. The company says it must use Highway 12 because the loads are too big to fit under bridges along interstate highways or rail lines.

Despite opposition, the oil and gas industry is undeterred. The Bakken Shale that lies 10,000 feet beneath a 200,000 square mile expanse of North Dakota, Montana, and Saskatchewan is said by the U.S. Geological Survey to contain more than 4 billion barrels of oil and trillions of cubic feet of natural gas. Oil industry geologists say there is much more than that in the Bakken, and in a second oil-rich shale reserve, the Three Forks, that lies below it.

Spurred by the Bakken riches, energy companies are now spending tens of millions of dollars to lease mineral rights in Wyoming and Colorado and are drilling exploratory wells in the Niobrara Shale, which sprawls beneath both states.

"It just almost boggles the mind,” Lynn Helms, director of the North Dakota Department of Mineral Resources, told a veterans group in Minot on Sept. 2. “It is not like the traditional oil and gas play.”

A 2006 study by the Department of Energy that looked at rising energy demand and diminishing freshwater supplies found that the collision between the two was occurring most violently in the fastest-growing parts of the country that also happened to have the scarcest water

‘The oil industry can find water elsewhere,’ said one North Dakota wildlife official.

resources — California, the Southwest, the Rocky Mountain states, and the Upper Great Plains.

It takes 2.5 to 6.5 gallons of water to extract and refine one gallon of tar sands oil, which is four times more water than it takes to produce oil from conventional reserves, according to a 2009 study by Argonne National Laboratory.

Moreover, producing tar sands oil, according to the Natural Resources Defense Council, generates as much as three times as many greenhouse gases per barrel as conventional oil production.

Extracting unconventional fossil fuel reserves like the Bakken formation uses a lot of water because getting to the oil and natural gas requires rupturing the deep shale to create open spaces and crevices through which the oil and gas can flow. The pulverizing process, called hydraulic fracturing or “fracking,” involves sinking drill bits two miles deep and then turning them to move horizontally through the shale. An armada of tank trucks hauls several million gallons of water to each well site, where pumps shoot it down the well at such super high pressure — 8,000 pounds per square inch — that the rock splits.

The practice is risky. Earlier this month, an oil well undergoing fracking near Kildeer, N.D. ruptured. The blowout leaked 100,000 gallons of fracturing fluid and crude oil before being plugged two days later.

Fracking has caused contamination of surface and groundwater in other states and harmed drinking water in some communities, according to a number of reports from local environmental organizations.

Hydro fracturing is a profitable method of natural gas extraction that uses large quantities of water and chemicals to free gas from underground rock formations. But New York City’s concerns about the practice have slowed a juggernaut that has been sweeping across parts of the northeastern U.S., Bruce Stutz reports.READ MORE

Earlier this year, a supervisor with the North Dakota Game and Fish Department formally opposed a farmer’s plan to sell a third of the water in eight-foot-deep Trenton Lake to a Texas energy developer. “Trenton Lake just doesn’t have the depth and capacity without seriously impacting the lake,” said the supervisor, Fred Ryckman. “The oil industry can find water elsewhere.”

Almost 150 oil and gas drilling rigs are operating in North Dakota this month, nearly tying a state record, and more than all but two other states, Texas and Pennsylvania. The oil and gas rush has been an economic boon to North Dakota, with more than 7,000 laborers migrating into the state; North Dakota’s unemployment rate has dropped to 3.6 percent, the nation’s lowest. The energy boom has also filled state coffers. When North Dakota’s budget cycle ended in June, state Budget Director Pam Sharp proudly reported an $800 million surplus.

Clearly, most North Dakota officials are not worrying — yet — about the environmental consequences.

Correction, Oct. 1, 2010: An earlier version of this article incorrectly stated the amount of water it takes to produce oil from tar sands. The correct figure, as cited by the Argonne National Laboratory, is that it takes 2.5 to 6.5 gallons of water to extract and refine one gallon of tar sands oil.

COMMENTS

Add to this macabre scene in the West the fact that the largest shale gas reserve in North America was announced earlier this year in New Brunswick. Unconventional and dirty gas drilling in the East may morph from a nascent industry into a dominant one, and soon.

Posted by
Erik Hoffner
on 30 Sep 2010

Thank goodness for Idaho's Judge Bradbury who is protecting the sanctity of our highways from any industrial use! I wouldn't want to slow down any cars that are burning foreign oil...

Posted by
WDM
on 30 Sep 2010

Thanks Keith Schneider for the article.

All of this activity is at the federal government's pleasure while their own reports from DOD and other agencies indicate global warming/ climate destabilization as both direct and indirect national security threats. Not to mention destruction of water, forest, wildlife and other resources for civic sustainability.

If a transformation of our corrupt government of ecocide corporatism were possible, this scale of human and financial resources could take us substantially off fossil/fissile fuels in one generation.

However, the military-industrial-finance-media complex fix seems to be in: talk clean and play dirty. Exploitation and profit rules. I'm sure 99% of the public has no idea what our beloved finance banks (oxymoron) are financing along with the wealthiest (and subsidized) corporations on Eaarth. Just think, over one half trillion dollars per year are moved out of global treasuries (International Energy Agency, 2010) so we can have more unfolding tragedies.

Posted by
James Newberry
on 30 Sep 2010

WDM - your sarcasm and hyperbole miss the point. The local issue of these oversized rigs on Idaho's highway 12 is not about keeping our highways free of industrial use — it's about making sure that large corporations follow the same set of laws that the rest of us are subject to when it comes to highway use.

These loads are over the legal limit as set by both federal and state law — the process to receive a special oversized permit has certain requirements that ConocoPhillips failed to meet and therefore the judge revoked the permit.

By making this an industry vs. environment argument you disregard the fact that we have a system of laws in place to protect our highways/bridges, and therefore protecting us, the taxpayers who pay for the maintainence and upkeep of the highways.

Are we so addicted to oil that you advocate the bending or breaking of the law in order to increase the profit margin of multi-national oil corporations?

Posted by
mhwygirl
on 30 Sep 2010

The oil companies (like the cocaine drug dealers) are NOT the problem. If AMERICANS didn't demand cheap gasolene and oil, these fossil fuels wouldn't be needed.

The USA needs to tar & feather it's consumers... don't want oil exploitation, STOP USING OIL.
Is the entire population of the USA so ignorant of this fundamental FACT.

$10 oil will fix the problem... in case no one noticed... you cannot have you cake, and eat it too!

Posted by
k24
on 30 Sep 2010

Accountable social costs (like disease) of burning one gallon of petroleum liquid already exceeds $10 (as it has for decades). Then add in climate change, defense, foreign policy, the Gulf tragedy and other unquantifiable externalities (read subsidies) and you'll find the price of extracting and burning mined fluids and coal but a small fraction of national costs and liabilities. That is why petrochemical mining is, and has historically been, the most massively subsidized business scheme on earth.

Posted by
James Newberry
on 30 Sep 2010

Keith - It is all about the cost of this fuel. Tar Sands and Shale require enormous amounts of energy to extract the oil. It will not make financial sense much longer and as the price rises our economies will continue to falter.

Posted by
Zev Paiss
on 30 Sep 2010

Interesting that they call it a high risk venture. To the oil business, this is low risk work, the only risk being price of oil. In conventional plays, one faces the risk of price, as well as the 90% chance of a dry hole. In unconventional plays, we know the oil is there before we invest in extraction.

Posted by
Doug
on 01 Oct 2010

Add to the cost the price of an ecosystem collapsing from toxic emissions:

Want carbon-neutral, environmentally friendly liquid fuels? Use nuclear energy to separate carbon from CO2 (from coal plants, perhaps -- that's better than sequestration) and hydrogen from water, and make synthetic fuels. We know how to do it.

Posted by
George S. Stanford
on 04 Oct 2010

It is beyond belief that anyone would dream of transporting equipment of this size on Highway 12, but it's unsurprising that Exxon/Mobile and other big firms want to save money by using the Idaho/Montana corridor (big companies are always looking for cheaper options so that their profits remain high). The fact that the ITD, Idaho Gov Butch Otter and a slew of other Idaho politicians are so eager to let them is, however, a disgrace. They have been elected to serve the best interest of the people of Idaho - not the interests of big business. The long-term social, environmental, and financial implications resulting from a major accident on Highway 12 far outweigh any immediate financial benefits which the state would gain from this project.

Posted by
Loree Westron
on 07 Oct 2010

Our "representatives" (from both MT and ID) have shown who they represent and it isn't the citizens. Thanks to all those, like Borg and Lin, who ferret out the truth, share it with all of us and lead the charge to stop those who would destroy our environment and way of life for a few dollars.

Posted by
STEPH
on 07 Oct 2010

Isn't it ironic that the people who live along the Highway 12 stretch that is mandated "wild and scenic" have to abide by the Forest Service rules so that the road remains "pristine" from commercial development will have to watch as the road becomes a commercial highway? Stop the mega-loads!

Posted by
Jean Carroll
on 08 Oct 2010

I would not disagree with the post by George S. Stanford "Use nuclear energy to separate carbon from CO2 (from coal ...)".

However, biofuel should be mentioned here.

Posted by
Steve Areva
on 15 Oct 2010

to Jean Carrolls comment about biofuel.

I think biofuel is a dangerous way to go as long as we get it from food sources. It rockets the price on food and will never work in the long run.

Right now nuclear is the best option. Or growth of green algie that can be converted to crude oil.

Posted by
lån
on 23 Oct 2010

The development of these unconventional hydrocarbon energy sources is one that will likely not stop in the foreseable future. The greater part of our current world industrial capitalist economic system, from exploitation of resources to manufacturing of goods, runs on hydrocarbon energy. It is a human ecosystem R-selected sere that will most likely come to pass when the net energy produced by hydrocarbons nears zero.

Variables such competition for available water resources are coming into conflict with exploitation of these energy sources. These present opportunities to use human political will, though skewed to monied interests, to start making changes with a lot of hard work.

The more we adopt lifestyles that rely less and less on hydrocarbon energy the more likely we are to change the system. However, doing this entails adopting a lifestyle more akin to the one that our grandfathers and great grandfathers led. This is something hard to do voluntarily when there is plentiful, cheap energy (witness the failure of the 70's "back to the land" movement) and our "progress" culture has expectations of higher and better standards of living.

Though I live in the golden age I wish I could live a long enough time to witness the green age, one in which human ecosystems have evolved into a K-selected sere in balance with Earth where a stable climax community can exist. Until then I can choose to tend to a garden, ride a bicycle, fly a quite, care for my neighbor and go for early morning walks.

May peace be with you all

Posted by
Jesubmar
on 23 Oct 2010

The explosion of natural gas exploration has caused the market to crash. At the end of business today, natural gas was sold at $2/BTU (British thermal unit) on the NYME (Claudia Assis, 2012). Reported by Adam Wilmoth, the effects of overproduction of natural gas will devastate the small natural gas producers, communities and citizens alike and can be seen in many markets in around country (2012).

According to Ed Becenti, the scarcity of water in the Southwest has driven the U.S. Legislature to pressure tribal governments to forfeit their legal right to water, which will affect the sovereignty as they try to pass Senate Bill 2109, the Navajo Hopi Little Colorado Water Settlement Act of 2012 (2012).

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